I recently had the distinct pleasure of moderating a panel discussion on innovation at Forrester’s Forum For CIOs, where I was able to share the stage with Lawrence Lee, Sr. Director of Strategy, PARC, a Xerox company, and Jim Stikeleather, Chief Innovation Officer, Dell Services. We had the opportunity to discuss the business imperatives for innovation, how to look at inventions and translate them into business value, and how to build the narrative that tells a compelling story around these innovations.
While the discussion gave me fodder for a suite of future blog posts, I just want to highlight a few things that came out of our talk to get you thinking a bit more about how to make your innovation program more effective.
Innovation is about turning invention into business value. The innovation process takes these inventions (whether internally or externally generated) and answers the questions to decide whether there is a business opportunity hiding within or to decide quickly (and cheaply) not to pursue that opportunity because of some learned facts.
Innovation requires both discrete funding and discrete staff. To think out of the box, we need to have both the funding and people whose metrics and goals are around innovation. As we generally want our best and brightest involved in our innovation programs, we also need to protect them from being called back to deal with the crisis du jour.
I'll leave it to the political pundits to read the tea leaves on the yes/no/how long of sequester-driven cuts to US government spending. What I will say is that a climate of cut-over-growth will remain with us for the foreseeable future. Regardless of what happens over the next few weeks, federal CIOs will be forced to grow services, capabilities, and constituent engagement concurrent with flat or decreasing budgets. This is not a short-term shift. It's high on the list of themes being communicated across government. You can see it in Federal CIO Steven VanRoekel'sFY2013 Budget Priorities, which has the theme of "Doing More With Less."
So, what should a government CIO do? I'm going to have to assume that CIOs will already have their short-term contingency plans in place, should the forced budget cuts kick in. However, it's also time to start thinking about what will follow, once things settle down. As a start, consider the following on your to-do list:
Review your agency's strategic plan — and start discussing what changes to it are anticipated based upon various budget scenarios.
Discuss how IT will be expected to support the transition from current to revised plans and goals.
Review your IT strategic plan, road maps, and delivery schedules in light of revised budget, staffing, and organizational changes with the new priorities in mind.
Review programs, projects, initiatives, and staffing to ensure optimal use of staff and resources.
Back in the day when “network” meant “telephone,” AT&T either directly or indirectly controlled virtually the whole thing. Bell Laboratories served as the R&D arm of the organization, developing the equipment that Western Electric would produce for AT&T. In addition to the very practical work in things like insulators for cables (which are a big deal when the cable is running under the Atlantic Ocean), there was a small group who conducted the basic work that led to discoveries such as the transistor, practical lasers, charge coupled devices (CCDs), and information theory. Bell Labs built the first communication satellites – Telstar.
While it could be argued that AT&T did not reap all of the benefits possible from its inventions, the way that Bell Labs operated presents some useful lessons for organizations looking to improve their innovative capabilities:
Benchmark data from the survey will feed into our Sustained Business Innovation Playbook. We're aiming to publish the results in December or January. If you're not a client, enter your email at the end of the survey, and we'll share the results with you.
. . . and thanks in advance for sharing your experiences.
"Innovate or die" is not just a catchy slogan. It’s the way that businesses need to operate in this market-driven world. And, as technology underpins more and more products, services, processes, and go-to-market strategies, the CIO must be involved in driving business-impacting innovations. This involvement ranges from supporting internal R&D to unearthing and vetting new technologies out in the market that can be internalized to disrupt the status quo and propel the organization forward.
Most organizations are cognizant of this reality. However, few have mastered making innovation into a sustainable practice with defined processes that take into account the differences between incremental change and true innovation. What is needed is less hyperbole and more practical information and examples of how to the CIO can and should support an innovation process to drive business value.
To deliver, you’ll need to understand and internalize the trends, understand the business capabilities required to deliver on sustainable innovation, and assess how prepared you actually are to deliver. Based on this insight, you then need to plot out a strategy and carefully plan your people, process, and technology. From there you have implement — building out your innovation network, and developing a governance model to enforce the right behaviors. And to continually improve, you need to focus on metrics, peer comparison, and change management.
I am periodically asked whether a business case should be required for those projects that fall into the "must do" category - projects such as those required to meet regulatory or auditing needs, bring a system up to security or other standards, or migrate off of end-of-life platforms. Why do a business case for these? you might ask. We know we're going to do them, and since there's no incremental business benefit, an ROI calculation is not practically calculated. So why go through the effort?
My view is simple - even without a quantifiable business benefit, the business case analysis helps in three ways:
The business case clarifies the alternatives. There are often multiple ways to accomplish the desired outcome. Evaluating each possible scenario using a standardized methodology clarifies the advantages and disadvantages, cost and time differences, and resource requirement differences in each choice. While a go/no go decision may be preordained, planners will be better prepared to pick the alternative that is least onerous to the organization.
The business case exposes differences in risks. Each alternative will likely have a different risk profile. A seemingly less expensive alternative requiring custom internal development may be more risky - both from cost and benefit perspectives - than a cloud-based COTS alternative with a higher list price. Documenting the risks associated with each alternative, something we recommend in any business case analysis, will point to the optimum solution.
CIOs consistently tell us that they want to exploit new technologies to drive innovation in the business. While many CIOs have groups chartered with R&D or new technology research, and most organizations have defined processes to “commercialize” those technology innovations that appear promising in their pilots, the middle period – between ideation and commercialization – is one with fewer management models and methods. During this time, there may be good ideas funded for prototyping, a number of projects funded for further study, and a number of prototypes waiting for the time to be ripe for commercialization.
So, how do we manage these mid-stage ideas and prototypes? Here are some ideas we’ve seen work that you might be able to use in your organization:
Track the prototypes. Just because an innovation process may be outside of the standard governance and management structure, it doesn’t mean we can’t share the same tools. Register your “innovation” projects in the same database as other projects. Link them all to a single “innovation” program to keep it easy to manage this group as a whole – and segregate them from your ongoing application or improvement initiatives and new project implementations.
Give someone overall responsibility for the innovation portfolio. If dispersed, initiatives can be “lost.” Centralized oversight of the portfolio will give it visibility.
I had an interesting conversation with a Forrester client in response to an inquiry about the definition of “time to value” for technology solutions. When I received the question, I thought, “That’s easy!” While there is no “GAAP” definition of time to value, I was ready to say that it would be one of two things:
1- The time from project start to the start of business benefit accrual. So, if a project took 12 months to implement, and then three months for the business to adapt to it, the time until business benefits began to accrue would be 15 months.
2- The time from project start to the date at which cumulative business benefits exceeded the cumulative costs. In other words, the time until the “payback” of the investment.
However, in trolling around to make sure that I hadn’t missed anything, I stumbled upon a potential third definition (and I wish I could point back to the source). One commentator on the Web suggested something a bit different – and something that has a great deal of merit as we rely more and more on technology to drive business gains. In his definition, time to value represented the time until the business targets for the solution were achieved. So, rather than looking at the start of benefits, or the date we’re no longer cash-negative, we are now looking at the time until the full desired benefits are achieved. So this becomes:
3- Time to value is the time from project initiation until the projection of total business benefits is achieved.
This change in perspective has a number of implications:
In today’s technology-fueled marketplace, the underlying systems, automated processes, and communications channels become crucial to continuing and growing your company’s revenue stream and customer engagement. As has occurred so many times over the past decades, there is an accompanying swing of the centralized IT/decentralized IT pendulum, with customer-facing departments, such as sales and marketing, acquiring their own technology solutions from cloud or SaaS vendors to meet customer needs. In the best organizations, these technology decisions and business-sponsored implementations are done within the framework of sound IT planning and long-term integration goals. For such decentralization to work right, IT and marketing must work together to provide the solution framework that integrates the customer-facing with the back office with both groups tied into the plans and goals of the other so that both can move in parallel towards the same goals — satisfying the customer and increasing revenues.
Our September CIO-CMO Forum 2011 will dive into the details on how IT and marketing work together at successful organizations. Right now, we’re interested in where you fall on the spectrum — how you and your IT department tie in to your company’s revenue metrics, customer satisfaction metrics, and marketing processes. Let us know in our Q3 2011 CIO Motivation And External Customer Satisfaction Survey. If you provide your email, we’ll send you a summary of the results.
Many organizations have seen large swings over the past two years in IT spending on technology, business spending on technology, and the way that IT and business interact to best manage business technology. Have you seen changes in your budgeting and planning cycles? Does the business expect more (or less) from IT today, as compared to two years ago? How well aligned is your IT organization to goals? We’ve seen these changes in many of the organizations we’ve been speaking with. But what about your organization? Please let us know what’s going on in your organization by taking this short survey on budgeting, planning, and alignment. If you’re a member of our CIO panel, you received an invitation to participate in this survey, and we’re hoping that you’ll let us know what’s going on in your organization. If you’re not currently a member of the panel, you can join our panel by clicking here. Thanks. We’ll publish the results in March or April.